Taxes influence business decisions. States take advantage of this by choosing tax systems that secure them a favorable position in tax competition. They aim to encourage companies to establish themselves within their territory, as this translates into additional tax revenue and jobs. By calculating effective tax rates, Martin Ruf demonstrates the positions that states have adopted in tax competition and examines whether taxes indeed exert the theoretically assumed influence on business decisions. His model of tax competition illustrates how states should consider the tax influence on business decisions when setting taxes. The author compares well-known definitions of effective tax rates and consolidates the results into a new definition of an indifference tax rate.